German industrial group Siemens and French rival Alstom agreed on Tuesday to merge their rail operations, creating a European champion to better withstand the international advance of Chinese state-owned CRRC Corp.
Siemens will own 50 percent of the joint venture, the companies said, while Alstom will supply Henri Poupart-Lafarge as chief executive, helping to counter criticism that France is giving up control of another national industrial icon.
Annual synergies are estimated at 470 million euros (US$554 million) in year four after the closing of the deal, a joint statement published on Alstom’s website showed.
“This Franco-German merger of equals sends a strong signal in many ways. We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term,” said Siemens CEO Joe Kaeser.
The deal is a blow to Canadian transportation group Bombardier, which also held talks with Siemens, sources have said, and which faces a separate battle this week to protect jobs in Québec and Northern Ireland.
The Siemens and Alstom transport businesses, which span the French TGV and German ICE high-speed trains as well as signaling and rail technology, had combined sales of about 15 billion euros (US$18 billion) in their last fiscal years.
Update: Caisse de dépôt et placement du Québec owns 30 percent of Bombardier’s rail business. The Canadian pension fund made a $2.1 billion (US$1.5 billion) convertible share investment in the unit in 2016.
(Reporting by Georgina Prodhan and Sudip Kar-Gupta; editing by Richard Lough)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Gonzalo Fuentes